A new report has found older people will face the greatest income squeeze from soaring energy costs this winter but young people will struggle most to pay their bills. The Resolution Foundation’s Intergenerational Audit concludes that over-75s are expected to spend eight per cent of their total household income on bills as they are more likely to live in larger and energy-inefficient homes.
Younger generations, who have seen years of stalled pay growth and high housing costs, will struggle the most as they are four times more likely to be on pre-payment meters and are less likely to have assets and savings, the report suggests.
Middle-aged households - ranging from 40 to 64-year-olds - will see the largest increases, with typical annual energy bills rising by over £1,000 on pre-cost of living crisis levels, to between £2,200 and £2,400.
The report found that even with UK Government support, the typical household energy bill will be 83 per cent higher in 2022-23 compared to levels before the cost of living crisis began.
It also concluded those aged between 40 and 64 are set to benefit the most from cost of living support measures announced this year because cuts to National Insurance Contributions do not benefit those over the State Pension age.
Molly Broome, of the Resolution Foundation, said: “All generations are facing difficulties from the growing cost of living crisis, but different generations are experiencing it in very different ways.
“Energy bills are set to rise by over 80 per cent this winter, compared to pre-crisis levels.
“The middle-aged will face the largest bill rises and older generations will see the greatest squeeze on their incomes due to their larger and less energy-efficient homes.
“But it’s younger people who are most likely to struggle to pay rising bills, because they are less likely to have savings to fall back on - and will therefore be forced to either rely on older friends or family members, or potentially go without heating during the coming cold weather.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “This report lays bare the carnage wreaked by the pandemic and cost of living crisis on people’s finances.
“Different generations are affected by different aspects, but no-one has emerged unscathed. We see how older pensioner households are much more affected by energy price rises - spending on average 8% of their disposable income on heating their homes which tend to be larger and much less energy efficient. However, their financial resilience means they are a group best able to deal with these costs.
“Older generations have been hit by inflation and have been less supported by the measures brought in by the UK Government to deal with the cost of living, but on balance their incomes have been supported by longer term measures such as the pension triple lock which has helped boost the income of pensioners since its introduction.”
Helen added: “Changes to working age benefits since 2010 mean pensioners are on average £666 better off while non-pensioners are £816 worse off. Under the triple lock, pensioners are in line for a blockbusting 10.1% increase in their State Pension for next year - though this is somewhat up in the air as the Chancellor puts together an Autumn Statement designed to plug a huge black hole in the public finances – the triple lock could be a casualty.”
A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The [UK] Government’s energy price guarantee will save the typical household around £700 this winter, based on what energy prices would have been under the current price cap - reducing bills by roughly a third. This comes in addition to £1,200 direct payments to vulnerable households.
“A Treasury-led review will consider how to support households from April 2023, focusing support for those in need while reducing costs for the taxpayer.”
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